The ethical culture in an organization can be thought of as a slice of the overall organizational culture. So, if the organizational culture represents “how we do things around here,” the ethical culture represents “how we do things around here in relation to ethics and ethical behavior in the organization.” The ethical culture represents the organization’s “ethics personality.”

From an ethical systems perspective, creating and sustaining a strong ethical culture is the key to creating an organization that supports people making good ethical decisions and behaving ethically every day. There are so many forces and factors[6]that lead people to take ethical shortcuts. But when all relevant organizational systems are pushing people in the same ethical direction, ethical failure is much less likely.

According to Treviño and Nelson[7], ethical culture should be thought of in terms of a multi-system framework that includes formal and informal systems that must be aligned to support ethical judgment and action. Leadership is essential to driving the ethical culture from a formal and informal perspective. Formally, leaders provide the resources to implement structures and programs that support ethics. More informally, through their own behavior, leaders are role models whose actions speak louder than their words, conveying “how we do things around here.” Other formal systems include selection systems, policies and codes, orientation and training programs, performance management systems, authority structures, and formal decision processes. On the informal side are the organization’s role models and heroes, the norms of daily behavior, organizational rituals that support or do not support ethical conduct, the stories people tell about the organization and their implications for conduct,and the language people use (i.e., is it okay to talk about ethics? Or is ethical fading[8] the norm?).

Codes of ethics, values statements [they don’t work unless they are truly embodied]

Ethical climate is a related area of research that refers to employees’ perceptions of the organization in terms of broad climates that either support or do not support ethics. The ethical climate questionnaire was originally developed to measure nine climates but most research has supported the existence of three to five climate types. For example, the perception that the organization has a “benevolence climate,” meaning a climate that supports multiple stakeholders inside and outside the organization, is associated with positive employee attitudes and behaviors. By contrast, perceptions that the organization has a “self-interest climate” where it’s every person for him or herself are associated with negative attitudes and behaviors. Research on ethical climate has recently been summarized in a meta-analysis (a study of studies).

Final Accounting[10], by Barbara Toffler, chronicles the culture that she found at Arthur Andersen a few years before the company’s downfall.

What Happened to Goldman Sachs[11], by Steven Mandis, is a more recent story of a culture that changed (in a negative direction) over the author’s time with the firm.

B) SUCCESSES

Cradle to Cradle Design at Herman Miller[12]: Moving Toward Environmental Sustainability is a Harvard Business Publishing case that highlights the importance of company selection, values and decision making processes in making the decision to support sustainability efforts in a decision about whether to switch from toxic PVC to an alternative material to be used in chair arm pads.​

Fighting Corruption at Siemens[14] is an interactive HBS case that represents both a failure (as the culture allowed bribery to continue long after the law had changed in Germany to no longer allow it) and a success as the company demonstrates its efforts to change its culture in a systematic way and over time.

Creating and/or changing an ethical culture is a complex and ongoing task that requires focused attention, support from the top, and effort from many organization members who are all pulling in the same direction.

Codes of conduct by themselves are not effective, employees must perceive that they are enforced and supported by other cultural systems.

More research is needed on the role of selection. Can organizations select members and leaders who will be more ethical, meaning less effort is needed to enculturate them? (See some ideas on our Personality and Personnel[15] page)

Much more research is needed on the effectiveness of training. Most organizations have training programs but we know little about whether they work, and if they do, what works. Are required on-line programs effective? Are face-to-face programs taught by managers more effective? Can games work?

Research is needed on what happens when ethical systems are nonaligned. What are the worst misalignments? For example, is the performance management system the real linchpin in ethical culture? Or, is it what managers do and say that really drive employee behavior?